Evolution of trading technology for exchanges in the Asia-Pacific

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18 March 2015

Anshuman Jaswal

Several Asian economies and capital markets have witnessed rapid growth in the last few years. This has led to an expansion in the market infrastructure and a string of notable investments by the leading regional exchanges in trading platform technology. The exchanges in Asia-Pacific have adopted varying strategies to meet their technology requirements. Some exchanges have used their in-house capabilities to develop trading platforms. Others have used a mix of in-house platforms and technology from third party providers. Finally, some have relied mainly on outside technology, using best-of-breed solutions. The objective has been to modernize exchange infrastructure and ensure that the exchange remains competitive in the face of pressure from leading global players as well as other regional exchanges. An interesting feature of the Asia-Pacific markets has been the linkages and tie-ups between the regional exchanges, as well as those with leading global exchanges. The market is exhibiting a unique mix of cooperation and competition. The most notable recent inter-linkages have been the Shanghai-Hong Kong Stock Connect and the ASEAN Trading Link. Both are still in early stages of being set up and there are some inevitable glitches before we see significant volumes. But what is important to note is that this kind of connectivity is spurring other exchanges to also try and increase access to their products from outside markets and exchanges. While there are certain advantages for exchanges in the Asia-Pacific, there is nevertheless room for improvement. There is potential to turn the market data function into a significant profit center. Some exchanges are already successful in this, but others need to follow suit. Also, there needs to be greater emphasis on market surveillance and tighter regulation in what is a fast-evolving market landscape. I have been working on an upcoming research report that looks at the issues discussed here in further detail.